The Paycheck Protection Program (PPP) SBA Loan Helps Businesses Keep Workforce Employed During Coronavirus (COVID‐19) Crisis + Loan Forgiveness Option.
The US government’s $2 trillion coronavirus economic relief package includes $350 billion in PPP funding on a first-come, first-serve basis for qualifying businesses.
The CARE Act created a helpful disaster Small Business Administration (SBA) relief program under existing the 7(a) SBA program that provides a direct incentive for small businesses to keep workers on the payroll. This program includes a simple application process, deferred payments, low-interest rate, and Loan Forgiveness provisions.
PPP Loan Details and Forgiveness
Per the SBA.Gov website: The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll). Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.
Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full‐time headcount declines, or if salaries and wages decrease.
This loan has a maturity of 2 years and an interest rate of 1%.
What are the PPP Funding Amounts & How to Apply?
The SBA application for the PPP program computes loan amount eligibility of 2.5 X “average monthly payroll to fund payroll, benefits, rent, and utilities. The average monthly amount is calculated with a 12-month look back at payroll reports (unless the business is less than 12 months old).
How do I Apply?
The Payroll Protection Plan offered limited funding on the April 3, 2020 launch. The application is a simple 2-page form that can be found at SBA PPP Application Form. As of April 27, 2020, the second round of the program is available as the SBA released $310 billion in funds to help small businesses that didn’t receive assistance during the first round.
You will apply for the loan with an SBA approved bank. If you have an existing banking relationship with a bank that is an SBA approved lending bank, your bank would be the best place to start. Most of the banks are posting an online link to apply and load-supporting documentation.
Also, If you have a dedicated banker, you will want to contact to assist and answer any questions.
Have the Eligibility Requirements Changed for the Second Round?
In the first round, the Treasury and the SBA had to write the rules rather quickly – meaning there was some confusion over the terms. This time around, they have stated that publicly listed companies may apply, but they must require the loan as necessary assistance to support ongoing operations. They have also noted that hedge funds and private equity firms are not eligible.
IMPORTANT: Do not delay and miss the opportunity to benefit from this program.